Theme 2 Flashcards
1
Q
explain economic grotwh
A
measures the rate the GDP of a. country changes over a year
2
Q
explain the difference between real and nominal
A
real takes into account inflation whereas nominal doesn’t
3
Q
explain the difference between total and per capita
A
total is the total GDP of everyone in the UK whereas per capita is per person
4
Q
explain gross national product
A
the total market value of the final goods and services produced by a nations economy during a specific period of time
5
Q
explain gross national income
A
the total income earned by a country’s people and businesses even if it was earned outside the country
6
Q
explain inflation
A
the general rise in prices
7
Q
explain deflation
A
the general fall in prices
8
Q
explain disinflation
A
the general rise in prices but at a slower rate than before.
9
Q
explain demand pull inflation
A
as there is more demand for the product the price rises
10
Q
explain cost push inflation
A
Firms push the cost of production onto the consumer
11
Q
explain growth of money supply
A
an increase in the. supply of money lowers interest rates which generates more investment and puts more money in the hands of the consumers so increases spending
12
Q
explain the effect of inflation on consumers
A
as prices are higher they can no longer buy as much with their money than before
13
Q
explain the impact of inflation on firms
A
they receive less sales for products as they’re more expensive so less profit
14
Q
explain the effect of inflation on the government
A
they have to pay more subsidies and benefits so are worse off
15
Q
explain the claimant count
A
measures people who are eligible to claim benefits in the UK
16
Q
explain benefits of claimant count
A
up to date + useful
easy to understand
cheap to access
17
Q
explain drawbacks of the claimant count
A
misses out those who are unemployed
not broken down by gender, ethnicity
not used in Europe
18
Q
explain the ILO survey
A
a survey of 60,000 people across a society and counts those who are without any kind of job in the 4 weeks and are able to start within the next 2 weeks
19
Q
explain benefits of the ILO survey
A
used in Europe
wider criteria
measures students + retirees
20
Q
explain drawbacks of the ILO survey
A
can be out of date
surveys can be inaccurate
21
Q
explain employment
A
the number actively working in the UK and is contributing to. the economy
22
Q
explain unemployment
A
when someone is willing and able to work but doesn’t have a job
23
Q
explain under-employment
A
when someone has a job but doesn’t work as many hours as they could ( part time job )
24
Q
explain inactivity
A
when someone doesn’t have a job and aren’t looking to find a new job
25
explain structural unemployment
long-lasting unemployment that comes about due to shifts in an economy
26
explain frictional unemployment
occurs with voluntary employment transitions within an economy
27
explain seasonal unemployment
occurs when people are unemployed at particular times of the year when demand for labour is lower than usual
28
explain demand deficiency
occurs when their isn't enough demand for goods and services in the economy leading to reduction in production and a corresponding reduction in employment
29
explain cyclical unemployment
occurs when people are unemployed at different times of the year
30
explain real wage inflexibility
occurs when the minimum wage set causes employees wages to be higher than what would be determined by the market forces of supply and demand
31
effects of migration on employment
they can fill in jobs that are available in the economy
32
effects of migration on unemployment
they could take jobs that unemployed people in the UK could do
33
explain effects of unemployment on. consumers
less money to spend on in the economy
34
explain effects of unemployment on firms
less workers to produce products
35
explain effects of unemployment on workers
they have to do more jobs which could lead to having to work overtime and cause exhaustion
36
explain effects of unemployment on the government
they have to spend more money on subsidies and welfare payments instead of healthcare and education
37
explain the balance of payments
it measures all international economic transactions between the UK and its trading partners
38
explain current account deficit
a sign that a country is borrowing more money from other countries than it is lending to other countries
39
explain current account surplus
a sign that a country is lending more money to countries than it is borrowing from countries
40
what is the aggregate demand equation
consumption (65%) + investment (25%) + government spending (15%) - (exports+imports) (5%)
41
understand disposable income and its influence on consumer spending
disposable income is a person money you're given before tax reductions. if people have more of it then they would spend more of it on the economy
42
understand wealth and its influence on consumer spending
wealth is the total value of all your assets. if wealth increases then their will be more spending (wealth effect)
43
understand inflation and its influence on consumer spending
inflation is the general rise in prices. if inflation is higher then it means prices are higher so their will be less spending
44
understand rate of interest and its influence on consumer spending
rate of interest is the amount you pay back on a loan. if the rate of interest is higher then their will be less spending
45
understand availability of credit and its influence on spending
availability of credit is the amount you can borrow from a bank. iff it is higher their will be more consumer spending
46
explain gross investment
the total expenditure made for buying capital goods over a period of time without accounting for depreciation.
47
explain net investment.
the total amount of money a company spends on capital assets minus the cost of the depreciation of those assets
48
explain depreciation
the drop in value of an asset
49
explain investment
spending on capital goods such as plant and equipment and new buildings to produce more consumer goods in the future
50
how does rate of interest influence investment
the lower the rate the greater amount of investment in a business
51
how does the accelerator theory influence investment
where investment expenditure increases at a faster rate. when demand or income increases
52
how does the cost of the investment influence investment in a business
the cheaper it is the more investment there is
53
how does technological change influence investment
if theirs an improvement in technology their will be more investment because they want the most up to date technology
54
how does confidence influence the amount of investment
the more confidence in a business the more investment their will be
55
how doe risk influence investment
the more risk the less investment
56
explain capital spending
spending on new public infrastructure
57
explain current spending
on providing public services
58
explain transfer payments
child benefits
59
explain exchange rates
the value of one currency compared to another
60
explain the multiplier effect
an initial change in aggregate demand can have a much greater final impact on the level of equilibrium national income
61
explain aggregate supply
the total output in the economy and the amount firms are willing to supply at a given price
62
explain short run aggregate supply
where one factor of production is fixed - less than 4 to 6 months
63
explain long run aggregate supply
where all factors of production are variable - more than 4 to 6 months
64
explain reasons for shifts in a supply curve.
improvements in technology
changes in relative productivity
changes in education and skills
changes in government regulations
competition policy
changes in costs of production
65
explain the circular flow of income
demonstrates how money moves from producers to households and back again in an endless loop
66
explain debt
the total amount of government borrowing
67
explain inequality
the number of people below the minimum level. of income
68
what are the 3 multiplier equations
1/1-MPC or 1/MPS or 1/MPW
69
explain factors that could cause economic growth
increase in capital goods
increase in labour force
new technology.
human capital
70
explain actual growth
the growth that the economy actually experiences
71
explain potential growth
the growth. the economy could've experienced if all resources were fully utilised
72
explain the trade cycle
shows how economic growth can fluctuate in deferent phases
73
explain the characteristics of a boom
higher GDP
lower unemployment
higher inflation rate
rising prices
74
explain the characteristics of a recession
lower GDP
higher unemployment
lower inflation rate
cheaper prices
75
explain the benefits of economic growth on consumers.
enables theme to consume more goods and enjoy better living standards
76
explain the drawbacks of economic growth on consumers
higher prices for consumers
77
explain the benefits of economic growth on firms
people have more money so buy more so they have greater demand for products so they create more profit
78
explain the drawbacks of economic growth on firms
productivity can decrease so their average costs rise
79
explain benefits of economic growth on the government
have to pay less subsidies and welfare payments so can spend it elsewhere
80
explain drawbacks of economic growth on. the government
impact of inflation
81
explain low unemployment
in the UK their are few people looking for jobs, meaning most are filled and less skill shortages
82
explain low and stable rate of inflation
inflation is around 2% so prices aren't too high but are just right for consumers
83
explain fiscal policy
the use of government spending and taxation to influence the economy
84
explain monetary policy
looks to influence the money supply flowing around the circular flow of income
85
what are the two monetary policy instruments
interest rates
quantitative easing
real rate of interest
credit availability
86
what are the fiscal policy instruments
government spending
taxation
87
explain progressive taxes
rate. of tax rises as income rises
88
explain proportional taxes
marginal rate of tax is constant leading to a constant average rate of tax
89
explain regressive taxes
the rate of tax paid falls as income falls
90
what are the components of loose/expansionary fiscal policy
decrease tax
increase government spending
91
what. are the components of tight fiscal policy
increase tax
decrease government spending
92
explain discretionary fiscal changes
deliberate changes in taxation and government spending
93
evaluate fiscal policy
recognition lags - time it takes to recognise a need for changes in gov. spending and taxation
imperfect information - key data on the economy is often delayed
response lags - time it takes to respond
94
explain automatic stabilisers
changes in tax revenues and spending as the economy moves through the trade cycle
95
explain quantitative easing
increase the supply of money into the banking systems designed to encourage commercial banks to lend at cheaper interest rates
its used to stimulate aggregate demand when interest rates have fallen to historically low levels
96
explain advantages of quantitative easing
it is another method when others don't work
it lowers interest rates
it increases cash
cheaper mortgage. payments so more disposable income
banks have more money so can lend at cheaper rate
higher business and consumer confidence
avoids deflation
97
explain disadvantages of quantitative easing
widens income inequality
uncertain time lags
increases house prices
thew Bank of England is a major holder of the government debt
economy becomes dependant on cheap money
low consumer confidence
high loan costs for some borrowers
98
explain the liquidity trap
when interest rates are very low, any further decreases in the rate will have minimal or no affect on aggregate demand
99
explain the Phillips curve
an economic theory that inflation and unemployment have a stable and inverse relationship
100
explain what a supply side policy is
measures governments take to increase the availability of affordability of goods and services
101
explain deregulation of labour markets
where the government reduces your employment rights and it makes it easier to have a flexible workforce
102
explain the principal agent
where there's a conflict in priorities between the owner of an asset and the person to whom control of the asset has been delegated to
